Annual Report September 30, 2016

Transcription

1 Annual Report Investor Information: This report and the financial statements contained herein are submitted for the general information of shareholders and are not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or solicitation of an offer to buy shares of The Covered Bridge Fund. Such offering is made only by prospectus, which includes details as to offering price and other material information. Distributed by Northern Lights Distributors, LLC Member FINRA

2 Dear Fellow Shareholders: For the twelve months ended September 30 th, 2016, the domestic equity market was up nicely with the S&P 500 Index posting a total return of 15.43%. This performance was a complete turnaround from the prior twelve month period. Performance of large multinational companies that pay above average dividends were back in favor. This helped the performance of The Covered Bridge Fund (the Fund) this fiscal year, resulting in a 13.73% total return for Class I shares of the Fund. Solid performance in fiscal 2016 was due to good underlying stock performance and the tactical decisions made with our call overwriting at the market lows. It is important for shareholders to understand the risks and rewards of writing calls after a strong market correction. Covered calls may provide income and slightly reduce the downside when a stock is declining, but for that income and protection, an investor gives up the upside potential of that stock s performance. This is one of the reasons we only overwrite approximately one half of each of the positions held in the Fund. After a big move lower in stock prices, it is sometimes necessary to adjust your positioning and write calls that are further out of the money and accept less income. This reduces the protection but allows stock prices to recover without being called away at low prices. At big extremes, it is often prudent to reduce the actual percentage of calls you are writing to allow for further recovery. This is exactly what was done in the Fund around option expiration time in both January and February of this year. The number of calls written were reduced in the Fund and the options were also written further out of the money. As the underlying stocks in the portfolio have recovered, the Fund has also recovered. Since this recovery, we are back to our philosophy of overwriting approximately half of each of the positions in the Fund. Apple Inc. (7.3%) was the single largest contributor to performance in the Fund for the previous twelve months. The Fund has taken a large position in this name due to strong conviction in our investment thesis. Apple Inc. continues to exhibit a sustainable competitive advantage over their peers and the stock still trades relatively cheap to the market in terms of earnings multiples. Microsoft Corporation (2.4%) was the second largest contributor to the Fund. Microsoft Windows continues to be the industry standard in desktop operating systems across global businesses and recent management changes have given investors additional confidence in the future growth and leadership of the company. Wells Fargo & Company (-2.7%) was the largest detractor to performance over the previous 12 months. The most notable reason for the stock s decline was the headline news surrounding an investigation and fine for the creation of unauthorized accounts and credit cards for customers. The CEO of the bank has since stepped down and the situation appears to be improving. Since inception through September 30th 2016, on an annualized basis, the Fund s Class I shares were up 6.17%, which compared to the S&P 500 which was up 10.87%. Over this period, the Fund s daily total return was less volatile at 78 percent of the S&P 500. The stated objective of the Fund is to seek current income and realized gains from writing options with capital appreciation as a secondary objective. The Fund passes on the dividend income received from the underlying common stocks (after Fund expenses) on a quarterly basis and distributes option premium income and realized capital gains on an annual basis. The Fund will be distributing income earned from option premiums and any capital gains this year back to shareholders in our annual capital gains distribution in December of

3 We are pleased with the overall performance and feel the Fund has performed as it should have given the volatility in the equity market. While the Fund has underperformed equity only products, it has outperformed other option related strategies and should continue to produce income with lower volatility than the equity market. Thank you for being a Covered Bridge Fund shareholder. Regards, John Schonberg, CFA & Michael Dashner, CFA () Parenthesis indicates the percent net asset Fund Security Holdings as of 9/30/2016t. *Past performance is no guarantee of future results. Investment return and principal value will vary. Investors shares when redeemed may be worth more or less than original cost. Returns do not reflect the deduction of taxes a shareholder would pay on distributions or redemption of fund shares. The Covered Bridge Fund made a ($.48 A share, $.52 I share) distribution of dividend income, option premiums, and capital gains during the period under review. The Fund s prospectus contains more complete information, including fees, expenses and risks involved in investing in newly public companies and should be read carefully before investing. The S&P 500 is an unmanaged composite of 500 large capitalization companies. An investment cannot be made directly in an index. Important Definitions: The S&P 500 Index is an unmanaged composite of 500 large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks. You cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. Volatility: A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. Covered Call: An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset in an attempt to generate increased income from the asset. This is often employed when an investor has a short-term neutral view on the asset and for this reason holds the asset long and simultaneously has a short position via the option to generate income from the option premium. Out of the money: A call option with a strike price that is higher than the market price of the underlying asset, or a put option with a strike price that is lower than the market price of the underlying asset. An out of the money option has no intrinsic value, but only possesses extrinsic or time value. As a result, the value of an out of the money option erodes quickly with time as it gets closer to expiry. If it is still out of the money at expiry, the option will expire worthless. Call Premium: The dollar amount over the par value of a callable fixed-income debt security that is given to holders when the security is called by the issuer. Dividend yield: A financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Strike price: The price at which a specific derivative contract can be exercised. Strike prices are mostly used to describe stock and index options, in which strike prices are fixed in the contract. For call options, the strike price is where the security can be bought (up to the expiration date), while for put options, the strike price is the price at which shares can be sold NLD-11/2/2016 2

4 Portfolio Review (Unaudited) Composition of the change in value of a $10,000 investment $14,000 $13,500 $13,000 $12,500 $12,000 $11,500 $11,000 $10,500 $10,000 $9,500 $9,000 The Covered Bridge Fund Class A - $11,873 The Covered Bridge Fund Class A (with Load) - $11,254 The Covered Bridge Fund Class I - $11,965 S&P 500 Total Return Index - $13,626 The Fund s performance figures* for the periods ended, compared to its benchmark: One Year Since Inception* The Covered Bridge Fund Class A without load 13.58% 5.89% Class A with load 7.61% 4.02% Class I 13.73% 6.17% S&P 500 Total Return Index ** 15.43% 10.87% * The Fund s inception date was October 1, **The S&P 500 Total Return Index is an unmanaged market capitalization-weighted index which is comprised of 500 of the largest U.S. domiciled companies and includes the reinvestment of all dividends. Investors cannot invest directly in an index or benchmark. The performance data quoted is historical. Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate. An investor s shares, when redeemed, may be worth more or less than the original cost. Total return is calculated assuming reinvestment of all dividends and distributions. Total returns would have been lower had the adviser not waived its fees and reimbursed a portion of the Fund s expenses. Returns for periods greater than one year are annualized. The Fund s investment adviser has contractually agreed to reduce its fees and/or absorb expenses of the Fund, at least until January 31, 2017, to ensure that the net annual fund operating expenses (excluding acquired fund fees and expenses and certain other non-operating expenses) will not exceed 1.90% and 1.65%, respectively for Class A and Class I, subject to possible recoupment from the Fund in future years. The Fund s total gross annual operating expenses, per its prospectus dated February 1, 2016, including underlying funds, are 2.34% for Class A and 2.09% for Class I. Class A shares are subject to a maximum sales charge imposed on purchases of 5.25%. Class A and Class I shares are subject to a redemption fee of 1.00% of the amount redeemed if held less than 90 days. The above performance figures do not reflect the deduction of taxes that a shareholder would have to pay on fund distributions or the redemption of the fund shares. For performance information current to the most recent month-end, please call

5 PORTFOLIO OF INVESTMENTS Shares Value COMMON STOCK % AEROSPACE/DEFENSE % 8,000 Boeing Co. ^ $ 1,053,920 AGRICULTURE % 4,000 Philip Morris International, Inc. ^ 388,880 AUTO MANUFACTURER % 15,000 General Motors Co. ^ 476,550 BANKS % 22,000 BB&T Corp. ^ 829,840 4,000 Goldman Sachs Groups, Inc. ^ 645,080 16,000 JPMorgan Chase & Co. ^ 1,065,440 15,000 US Bancorp ^ 643,350 22,000 Wells Fargo & Co. ^ 974,160 4,157,870 BEVERAGES % 25,000 Coca-Cola Co. 1,058,000 6,000 PepsiCo, Inc. ^ 652,620 1,710,620 BIOTECHNOLOGY % 1,000 Amgen, Inc. ^ 166,810 CHEMICALS % 7,500 Du Pont (EI) De Nemours & Co. ^ 502,275 20,000 Potash Corp. of Saskatchewan, Inc. ^ 326, ,675 COMPUTERS % 23,000 Apple, Inc. ^ 2,600,150 4,000 International Business Machines Corp. ^ 635,400 8,000 Seagate Technology PLC ^ 308,400 3,543,950 COSMETICS/PERSONAL CARE % 1,500 Procter & Gamble Co. ^ 134,625 ELECTRIC % 4,000 Dominion Resources, Inc. ^ 297,080 8,000 Duke Energy Corp. ^ 640,320 9,000 Exelon Corp. ^ 299,610 1,237,010 ELECTRICAL COMPONENTS & EQUIPMENT % 12,000 Emerson Electric Co. ^ 654,120 See accompanying notes to financial statements. 4

6 PORTFOLIO OF INVESTMENTS (Continued) Shares Value ELECTRONICS % 12,000 Corning, Inc. ^ $ 283,800 3,000 Honeywell International, Inc. ^ 349,770 FOOD % 633,570 5,000 General Mills, Inc. ^ 319,400 6,000 Hershey Co. ^ 573,600 14,000 Whole Foods Market, Inc. ^ 396,900 HEALTHCARE PRODUCTS % 1,289,900 20,000 Abbott Laboratories ^ 845,800 INSURANCE % 5,000 Prudential Financial, Inc. ^ 408,250 3,000 Travelers Cos, Inc. ^ 343, ,900 IRON/STEEL % 30,000 Vale SA - ADR 165,000 LEISURE TIME % 4,000 Harley Davidson, Inc. ^ 210,360 MACHINERY- CONSTRUCTION & MINING % 4,000 Caterpillar, Inc. ^ 355,080 MEDIA % 8,000 Walt Disney Co. ^ 742,880 MINING % 5,000 BHP Billiton Ltd. - ADR 173,250 5,000 Freeport-McMoRan, Inc. 54, ,550 MISCELLANEOUS MANUFACTURING % 30,000 General Electric Co. 888,600 OFFICE/BUSINESS EQUIPMENT % 30,000 Xerox Corp. ^ 303,900 OIL & GAS % 28,000 BP PLC - ADR ^ 984,480 5,000 Chevron Corp. ^ 514,600 6,000 Ensco PLC 51,000 10,000 Exxon Mobil Corp. ^ 872,800 12,000 Transocean Ltd. * 127,920 2,550,800 See accompanying notes to financial statements. 5

7 PORTFOLIO OF INVESTMENTS (Continued) Shares Value PHARMACEUTICALS % 11,000 AbbVie, Inc. ^ $ 693,770 17,000 Bristol-Myers Squibb Co. 916,640 12,000 Eli Lily & Co. ^ 963, Merck & Co., Inc. ^ 56,169 22,000 Pfizer, Inc. ^ 745,140 REAL ESTATE INVESTMENT TRUSTS % 3,374,839 9,000 HCP, Inc. ^ 341,550 RETAIL % 6,000 Home Depot, Inc. ^ 772,080 14,000 Kohl's Corp. ^ 612,500 3,000 McDonald's Corp. ^ 346,080 12,000 Nordstrom, Inc. ^ 622,560 14,000 Starbucks Corp. ^ 757,960 9,000 Target Corp. ^ 618,120 3,000 Wal-Mart Stores, Inc. 216,360 3,945,660 SEMICONDUCTORS % 10,000 Intel Corp. ^ 377,500 6,000 QUALCOMM, Inc. ^ 411, ,500 SOFTWARE % 15,000 Microsoft Corp. ^ 864,000 TELECOMMUNICATIONS % 15,000 AT&T, Inc. ^ 609,150 23,000 Cisco Systems, Inc. ^ 729,560 7,200 Verizon Communications, Inc. ^ 374,256 1,712,966 TOYS/GAMES/HOBBIES % 2,500 Mattel, Inc. ^ 75,700 TRANSPORTATION % 2,000 Union Pacific Corp. ^ 195,060 TOTAL COMMON STOCK (Cost - $37,513,581) 34,616,645 See accompanying notes to financial statements. 6

8 PORTFOLIO OF INVESTMENTS (Continued) Contracts ** Value PUT OPTIONS PURCHASED * % 300 SPDR S&P 500 ETF Trust Expiration October 2016, Exercise Price $ ,800 TOTAL PUT OPTIONS PURCHASED (Cost - $104,600) Shares SHORT-TERM INVESTMENTS % MONEY MARKET FUND % 1,201,803 Morgan Stanley Institutional Liquidity Funds - Prime Portfolio, Institutional Shares % + 1,201,803 TOTAL SHORT-TERM INVESTMENTS (Cost - $1,201,803) TOTAL INVESTMENTS % (Cost - $38,819,984) (a) $ 35,853,248 CALL OPTIONS WRITTEN (Premiums Received - $266,981) - (0.9) % (318,677) OTHER ASSETS LESS LIABILITIES % NET ASSETS % $ 224,938 35,759,509 Contracts ** Value CALL OPTIONS WRITTEN * - (0.9) % 50 Abbott Laboratories $ 8,000 Expiration October 2016, Exercise Price $ AbbVie, Inc. 1,595 Expiration October 2016, Exercise Price $ Amgen, Inc. 490 Expiration October 2016, Exercise Price $ Apple, Inc. 10,700 Expiration October 2016, Exercise Price $ AT&T, Inc. 4,300 Expiration October 2016, Exercise Price $ BB&T Corp. 5,265 Expiration October 2016, Exercise Price $ Boeing Co. 14,200 Expiration October 2016, Exercise Price $ BP PLC - ADR 22,260 Expiration October 2016, Exercise Price $ Caterpillar, Inc. 6,090 Expiration October 2016, Exercise Price $ Chevron Corp. 10,200 Expiration October 2016, Exercise Price $ Cisco Systems, Inc. 9,085 Expiration October 2016, Exercise Price $31.00 See accompanying notes to financial statements. 7

9 PORTFOLIO OF INVESTMENTS (Continued) Contracts ** Value CALL OPTIONS WRITTEN * (Continued) - (0.9)% 60 Corning, Inc. $ 5,160 Expiration October 2016, Exercise Price $ Dominion Resources, Inc. 3,200 Expiration October 2016, Exercise Price $ Duke Energy Corp. 5,200 Expiration October 2016, Exercise Price $ Du Pont (EI) De Nemours & Co. 3,185 Expiration October 2016, Exercise Price $ Eli Lily & Co. 9,960 Expiration October 2016, Exercise Price $ Emerson Electric Co. 15,600 Expiration October 2016, Exercise Price $ Exelon Corp. 1,440 Expiration October 2016, Exercise Price $ Exxon Mobil Corp. 14,800 Expiration October 2016, Exercise Price $ General Mills, Inc. 950 Expiration October 2016, Exercise Price $ General Motors Co. 4,275 Expiration October 2016, Exercise Price $ Goldman Sachs Group, Inc. 2,820 Expiration October 2016, Exercise Price $ Harley Davidson, Inc. 5,320 Expiration October 2016, Exercise Price $ HCP, Inc. 5,850 Expiration October 2016, Exercise Price $ Hershey Co. 810 Expiration October 2016, Exercise Price $ Home Depot, Inc. 9,390 Expiration October 2016, Exercise Price $ Honeywell International, Inc. 4,800 Expiration October 2016, Exercise Price $ Intel Corp. 4,000 Expiration October 2016, Exercise Price $ International Business Machines Corp. 13,300 Expiration October 2016, Exercise Price $ JPMorgan Chase & Co. 3,570 Expiration October 2016, Exercise Price $ Kohl's Corp. 4,550 Expiration October 2016, Exercise Price $45.00 See accompanying notes to financial statements. 8

10 PORTFOLIO OF INVESTMENTS (Continued) Contracts ** Value CALL OPTIONS WRITTEN * (Continued) - (0.9)% 25 Mattel, Inc. $ 813 Expiration October 2016, Exercise Price $ McDonald's Corp. 2,520 Expiration October 2016, Exercise Price $ Merck & Co., Inc. 1,449 Expiration October 2016, Exercise Price $ Microsoft Corp. 7,350 Expiration October 2016, Exercise Price $ Nordstrom, Inc. 4,840 Expiration October 2016, Exercise Price $ Pepsi Co., Inc. 13,200 Expiration October 2016, Exercise Price $ Pfizer, Inc. 2,640 Expiration October 2016, Exercise Price $ Philip Morris International, Inc. 1,440 Expiration October 2016, Exercise Price $ Potash Corp. of Saskatchew 2,900 Expiration October 2016, Exercise Price $ Procter & Gamble Co. 4,050 Expiration October 2016, Exercise Price $ Prudential Financial, Inc. 7,750 Expiration October 2016, Exercise Price $ QUALCOMM, Inc. 18,600 Expiration October 2016, Exercise Price $ Seagate Technology PLC 12,680 Expiration October 2016, Exercise Price $ Starbucks Corp. 5,080 Expiration October 2016, Exercise Price $ Target Corp. 2,728 Expiration October 2016, Exercise Price $ Travelers Cos, Inc. 3,000 Expiration October 2016, Exercise Price $ Union Pacific Corp. 3,880 Expiration October 2016, Exercise Price $ US Bancorp 3,750 Expiration October 2016, Exercise Price $ Verizon Communications, Inc. 1,512 Expiration October 2016, Exercise Price $ Walt Disney Co. 2,540 Expiration October 2016, Exercise Price $93.00 See accompanying notes to financial statements. 9

11 PORTFOLIO OF INVESTMENTS (Continued) Contracts ** Value CALL OPTIONS WRITTEN * (Continued) - (0.9)% 60 Wells Fargo & Co. $ 900 Expiration October 2016, Exercise Price $ Whole Foods Market, Inc. 640 Expiration October 2016, Exercise Price $ Xerox Corp. 4,050 Expiration October 2016, Exercise Price $10.00 TOTAL CALL OPTIONS WRITTEN $ 318,677 (Premium Received $266,981) ADR - American Depositary Receipt PLC - Public Limited Company + Variable rate security - interest rate is as of. ^ Security is subject to written call options. * Non-income producing security. ** Each option contract allows the holder of the option to purchase or sell 100 shares of the underlying stock. (a) Represents cost for financial reporting purposes. Aggregate cost for federal tax purposes, including options written, is $38,671,526 and differs from value by net unrealized appreciation (depreciation) of securities as follows: Unrealized Appreciation: $ 186,261 Unrealized Depreciation: (3,323,216) Net Unrealized Depreciation: $ (3,136,955) See accompanying notes to financial statements. 10

12 PORTFOLIO OF INVESTMENTS (Continued) Portfolio Composition as of Breakdown by Sector (Unaudited) Breakdown by Country (Unaudited) Percent of Net Percent of Net Assets Assets Common Stock 96.8% Common Stock 96.8% Consumer, Non-cyclical 22.1% United States 91.6% Technology 15.4% Britain 2.9% Financial 14.7% Canada 0.9% Consumer, Cyclical 13.1% Australia 0.5% Industrial 10.6% Brazil 0.5% Energy 7.1% Switzerland 0.4% Communications 6.9% Options Purchased 0.1% Utilities 3.5% Short-term Investments 3.4% Basic Materials 3.4% Options Written (0.9)% Options Purchased 0.1% Other Assets Less Liabilities 0.6% Short-term Investments 3.4% Net Assets 100.0% Call Options Written (0.9)% Other Assets Less Liabilities 0.6% Net Assets 100.0% See accompanying notes to financial statements. 11

13 STATEMENT OF ASSETS AND LIABILITIES Assets: Investments in Securities at Value (cost $38,819,984) $ 35,853,248 Receivable for Fund Shares Sold 184,356 Deposits with Broker 56,700 Dividend and Interest Receivable 34,370 Prepaid Expenses and Other Assets 10,299 Total Assets 36,138,973 Liabilities: Options Written (premiums received $266,981) 318,677 Accrued Advisory Fees 23,019 Payable to Related Parties 10,051 Payable for Fund Shares redeemed 2,850 Distribution (12b-1) Fees Payable 1,267 Accrued Expenses and Other Liabilities 23,600 Total Liabilities 379,464 Net Assets $ 35,759,509 Class A Shares Net Assets (Unlimited shares of no par value beneficial interest authorized; 651,484 shares of beneficial interest outstanding) $ 6,584,315 Net Asset Value and Redemption Price Per Share (a) ($6,584,315/651,484 shares of beneficial interest outstanding) $ Offering Price Per Share ($10.11/0.9475) $ Class I Shares: Net Assets (Unlimited shares of no par value interest authorized; 2,888,065 shares of beneficial interest outstanding) $ 29,175,194 Net Asset Value, Offering and Redemption Price Per Share (a) ($29,175,194/2,888,065 shares of beneficial interest outstanding) $ Composition of Net Assets: Paid-in-Capital $ 36,769,920 Undistributed net investment income 399 Accumulated net realized gain from investments, options purchased, and options written 2,007,622 Net unrealized depreciation of: Investments and options purchased (2,966,736) Written options (51,696) Net Assets $ 35,759,509 (a) The Fund charges a fee of 1% on redemptions of shares held for less then 90 days. See accompanying notes to financial statements. 12

14 STATEMENT OF OPERATIONS For the Year Ended Investment Income: Dividend Income (Less $1,679 Foreign Taxes) $ 849,024 Interest Income 6,850 Total Investment Income 855,874 Expenses: Investment Advisory Fees 390,819 Transfer Agent Fees 48,293 Administration Fees 45,575 Fund Accounting Fees 34,674 Custody Fees 18,340 Audit Fees 15,164 Legal Fees 14,232 Chief Compliance Officer Fees 14,013 Registration & Filing Fees 13,569 Printing Expense 13,096 Trustees' Fees 11,807 Distribution (12b-1) fees - Class A 11,254 Insurance Expense 1,352 Miscellaneous Expenses 4,250 Total Expenses 636,438 Less: Fee Waived by Adviser (108,863) Net Expenses 527,575 Net Investment Income 328,299 Net Realized and Unrealized Gain (Loss) on Investments: Net Realized Gain on: Investments and Options Purchased 1,182,496 Options Written 1,032,161 Total Net Realized Gain on Investments 2,214,657 Net Change in Unrealized Appreciation (Depreciation) on: Investments and Options Purchased 1,589,820 Options Written (78,769) Total Net Change in Unrealized Appreciation 1,511,051 Net Realized and Unrealized Gain on Investments 3,725,708 Net Increase in Net Assets Resulting From Operations $ 4,054,007 See accompanying notes to financial statements. 13

15 STATEMENTS OF CHANGES IN NET ASSETS For the Year For the Year Ended Ended September 30, 2015 Operations: Net Investment income $ 328,299 $ 347,828 Net realized gain from investments, options purchased, and options written 2,214,657 1,201,941 Net change in unrealized appreciation (depreciation) of investments, options purchased and options written 1,511,051 (3,635,652) Net Increase (Decrease) in Net Assets Resulting From Operations 4,054,007 (2,085,883) Distributions to Shareholders From: From net investment income: Class A ($0.07 and $0.10, respectively) (32,994) (40,396) Class I ($0.11 and $0.13, respectively) (296,815) (308,545) From net realized gains: Class A ($0.41 and $1.00, respectively) (162,415) (362,485) Class I ($0.41 and $1.00, respectively) (1,054,138) (1,952,424) Net decrease in net assets from distributions to shareholders (1,546,362) (2,663,850) Capital Share Transactions: Class A Proceeds from Shares Issued (280,035 and 71,653 shares, respectively) 2,738, ,244 Distributions Reinvested (20,492 and 39,824 shares, respectively) 190, ,093 Redemption Fee Proceeds - 66 Cost of Shares Redeemed (38,566 and 56,685 shares, respectively) (381,326) (569,532) Total Class A 2,547, ,871 Class I Proceeds from Shares Issued (287,403 and 536,962 shares, respectively) 2,740,336 5,491,584 Distributions Reinvested (138,990 and 220,629 shares, respectively) 1,293,267 2,229,535 Redemption Fee Proceeds Cost of Shares Redeemed (122,833 and 145,562 shares, respectively) (1,208,952) (1,517,485) Total Class I 2,824,651 6,204,015 Total Capital Share Transactions 5,372,563 6,789,886 Total Increase in Net Assets 7,880,208 2,040,153 Net Assets: Beginning of Year 27,879,301 25,839,148 End of Year + $ 35,759,509 $ 27,879,301 + Includes undistributed net investment income $ 399 $ 181 See accompanying notes to financial statements. 14

16 - Class A FINANCIAL HIGHLIGHTS Per share data and ratios for a share of beneficial interest throughout each year presented. For the Year For the Year For the Year Ended Ended Ended September 30, 2015 September 30, 2014 (1) Net Asset Value, Beginning of Year $ 9.36 $ $ Increase (Decrease) From Operations: Net investment income (2) Net realized and unrealized gain (loss) on investments 1.15 (0.84) 1.17 Total from operations 1.23 (0.73) 1.25 Less Distributions: From net investment income (0.07) (0.10) (0.06) From net realized gains (0.41) (1.00) - Total Distributions (0.48) (1.10) (0.06) Paid in capital from redemption fees (2) (4) 0.00 (4) Net Asset Value, End of Year $ $ 9.36 $ Total Return (3) 13.58% (7.13)% 12.55% Ratios/Supplemental Data Net assets, end of year (in 000's) $ 6,584 $ 3,647 $ 3,745 Ratio of gross expenses to average net assets (5) 2.25% 2.33% 2.69% Ratio of net expenses to average net assets 1.90% 1.90% 1.90% Ratio of net investment income to average net assets 0.81% 1.03% 0.76% Portfolio turnover rate 193% 208% 266% (1) Class A commenced operations October 1, (2) Per share amounts are calculated using the average shares method, which more appropriately presents the per share data for the year. (3) Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gains distributions, if any, excluding the effect of sales loads and redemptions fees. Had the Adviser not absorbed a portion of Fund expenses, total returns would have been lower. Total returns for periods less than one year are not annualized. (4) Amount is less than $.01 per share. (5) Represents the ratio of expenses to average net assets absent fee waivers and/or expense reimbursements by the Adviser. See accompanying notes to financial statements. 15

17 - Class I FINANCIAL HIGHLIGHTS Per share data and ratios for a share of beneficial interest throughout each year presented. For the Year For the Year For the Year Ended Ended Ended September 30, 2015 September 30, 2014 (1) Net Asset Value, Beginning of Year $ 9.38 $ $ Increase (Decrease) From Operations: Net investment income (2) Net realized and unrealized gain (loss) on investments 1.14 (0.82) 1.18 Total from operations 1.24 (0.69) 1.29 Less Distributions: From net investment income (0.11) (0.13) (0.09) From net realized gains (0.41) (1.00) - Total Distributions (0.52) (1.13) (0.09) Paid in capital from redemption fees (2) (4) 0.00 (4) Net Asset Value, End of Year $ $ 9.38 $ Total Return (3) 13.73% (6.80)% 12.88% Ratios/Supplemental Data Net assets, end of year (in 000's) $ 29,175 $ 24,232 $ 22,094 Ratio of gross expenses to average net assets (5) 2.00% 2.08% 2.44% Ratio of net expenses to average net assets 1.65% 1.65% 1.65% Ratio of net investment income to average net assets 1.09% 1.28% 1.04% Portfolio turnover rate 193% 208% 266% (1) Class I commenced operations October 1, (2) Per share amounts are calculated using the average shares method, which more appropriately presents the per share data for the year. (3) Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gains distributions, if any, excluding the effect of redemptions fees. Had the Adviser not absorbed a portion of Fund expenses, total returns would have been lower. Total returns for periods less than one year are not annualized. (4) Amount is less than $.01 per share. (5) Represents the ratio of expenses to average net assets absent fee waivers and/or expense reimbursements by the Adviser. See accompanying notes to financial statements. 16

18 1. ORGANIZATION The Covered Bridge Fund NOTES TO FINANCIAL STATEMENTS The Covered Bridge Fund (the Fund ) is a diversified series of shares of beneficial interest of Northern Lights Fund Trust III (the Trust ), a Delaware statutory trust organized on December 5, 2011 and registered under the Investment Company Act of 1940, as amended (the 1940 Act ), as an open-end management investment company. The investment objective of the Fund is to seek current income and realized gains from writing options with capital appreciation as a secondary objective. The Fund commenced operations on October 1, The Fund currently offers Class A and Class I shares. Class A shares are offered at net asset value plus a maximum sales charge of 5.25%. Class I shares are offered at net asset value. The Fund charges a fee of 1% on redemptions of shares held for less than 90 days. Each class represents an interest in the same assets of the Fund and classes are identical except for differences in their sales charge structures and ongoing service and distribution charges. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its service and/or distribution plans. The Fund s income, expenses (other than class specific distribution fees) and realized and unrealized gains and losses are allocated proportionately each day based upon the relative net assets of each class. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Fund in preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America ( GAAP ). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies. Security Valuation The Fund s securities are valued at the last sale price on the exchange in which such securities are primarily traded, as of the close of business on the day the securities are being valued. In the absence of a sale on the primary exchange, a security shall be valued at the mean between the current bid and ask prices on the day of valuation. NASDAQ traded securities are valued using the NASDAQ Official Closing Price ( NOCP ). Exchange traded options are valued at the last sale price or in the absence of a sale, at the mean between the current bid and ask prices. Short-term investments that mature in 60 days or less may be valued at amortized cost. Securities for which current market quotations are not readily available or for which quotations are not deemed to be representative of market values are valued at fair value as determined in good faith by or under the direction of the Trust s Board of Trustees (the Board ) in accordance with the Trust s Portfolio Securities Valuation Procedures (the Procedures ). The Procedures consider, among others, the following factors to determine a security s fair value: the nature and pricing history (if any) of the security; whether any dealer quotations for the security are available; and possible valuation methodologies that could be used to determine the fair value of the security. The Fund may hold securities, such as private investments, interests in commodity pools, other non-traded securities or temporarily illiquid securities, for which market quotations are not readily available or are determined to be unreliable. These securities will be valued using the fair value procedures approved by the Board. The Board has delegated execution of these procedures to a fair value team composed of one or more officers from each of the (i) Trust, (ii) administrator, and (iii) adviser. The team may also enlist third party consultants such as a valuation specialist at a public accounting firm, valuation consultant, or financial officer of a security issuer on an as-needed basis to assist in determining a security-specific fair value. The Board has also engaged a third party valuation firm to attend valuation meetings held by the Trust, review minutes of such meetings and report to the Board on a quarterly basis. The Board reviews and ratifies the execution of this process and the resultant fair value prices at least quarterly to assure the process produces reliable results. Fair Valuation Process As noted above, the fair value team is composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) adviser. The applicable investments are valued collectively via inputs from each of these groups. For example, fair value determinations are required for the following securities: (i) securities for which market quotations are insufficient or not readily available on a particular business day (including securities for which there is a short and temporary lapse in the provision of a price by the regular pricing source), (ii) securities for which, in the judgment of the adviser, the prices or values available do not represent the fair value of the instrument. Factors which may cause the adviser 17

19 NOTES TO FINANCIAL STATEMENTS (Continued) to make such a judgment include, but are not limited to, the following: only a bid price or an asked price is available; the spread between bid and asked prices is substantial; the frequency of sales; the thinness of the market; the size of reported trades; and actions of the securities markets, such as the suspension or limitation of trading; (iii) securities determined to be illiquid; (iv) securities with respect to which an event that will affect the value thereof has occurred (a significant event ) since the closing prices were established on the principal exchange on which they are traded, but prior to the Fund s calculation of its net asset value. Specifically, interests in commodity pools or managed futures pools are valued on a daily basis by reference to the closing market prices of each futures contract or other asset held by a pool, as adjusted for pool expenses. Restricted or illiquid securities, such as private investments or non-traded securities are valued via inputs from the adviser based upon the current bid for the security from two or more independent dealers or other parties reasonably familiar with the facts and circumstances of the security (who should take into consideration all relevant factors as may be appropriate under the circumstances). If the Adviser is unable to obtain a current bid from such independent dealers or other independent parties, the fair value team shall determine the fair value of such security using the following factors: (i) the type of security; (ii) the cost at date of purchase; (iii) the size and nature of the Fund's holdings; (iv) the discount from market value of unrestricted securities of the same class at the time of purchase and subsequent thereto; (v) information as to any transactions or offers with respect to the security; (vi) the nature and duration of restrictions on disposition of the security and the existence of any registration rights; (vii) how the yield of the security compares to similar securities of companies of similar or equal creditworthiness; (viii) the level of recent trades of similar or comparable securities; (ix) the liquidity characteristics of the security; (x) current market conditions; and (xi) the market value of any securities into which the security is convertible or exchangeable. The Fund utilizes various methods to measure the fair value of all of its investments on a recurring basis. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of input are: Level 1 Unadjusted quoted prices in active markets for identical assets and liabilities that the Fund has the ability to access. Level 2 Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument in an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. Level 3 Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. 18

20 NOTES TO FINANCIAL STATEMENTS (Continued) The following tables summarize the inputs used as of for the Fund s assets and liabilities measured at fair value: Assets * Level 1 Level 2 Level 3 Total Common Stock $ 34,616,645 $ - $ - $ 34,616,645 Call Options Purchased 34, ,800 Short-Term Investment 1,201, ,201,803 Liabilities Total $ 35,853,248 $ - $ - $ 35,853,248 Call Options Written $ 312,600 $ 6,077 $ - $ 318,677 Total $ 312,600 $ 6,077 $ - $ 318,677 The Fund did not hold any Level 3 securities during the year ended. There were no transfers into or out of Level 1, Level 2, or Level 3 during the year ended. It is the Fund s policy to record transfers into or out of any Level at the end of the reporting period. * Please refer to the Portfolio of Investments for Industry Classification. Option Transactions The Fund is subject to equity price risk in the normal course of pursuing its investment objective and may purchase or sell options to help hedge against risk. When the Fund writes a call option, an amount equal to the premium received is included in the statement of assets and liabilities as a liability. The amount of the liability is subsequently markedto-market to reflect the current market value of the option. If an option expires on its stipulated expiration date or if the Fund enters into a closing purchase transaction, a gain or loss is realized. If a written call option is exercised, a gain or loss is realized for the sale of the underlying security and the proceeds from the sale are increased by the premium originally received. As writer of an option, the Fund has no control over whether the option will be exercised and, as a result, retains the market risk of an unfavorable change in the price of the security underlying the written option. The Fund may purchase put and call options. Put options are purchased to hedge against a decline in the value of securities held in the Fund s portfolio. If such a decline occurs, the put options will permit the Fund to sell the securities underlying such options at the exercise price, or to close out the options at a profit. The premium paid for a put or call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the underlying security rises or declines sufficiently, the option may expire worthless to the Fund. In addition, in the event that the price of the security in connection with which an option was purchased moves in a direction favorable to the Fund, the benefits realized by the Fund as a result of such favorable movement will be reduced by the amount of the premium paid for the option and related transaction costs. Written and purchased options are non-income producing securities. With purchased options, there is minimal counterparty risk to the Fund since these options are exchange traded and the exchange s clearinghouse, as counterparty to all exchange traded options, guarantees against a possible default. The notional value of the derivative instruments outstanding as of as disclosed in the Portfolio of Investments and the amounts realized and changes in unrealized gains and losses on derivative instruments during the period as disclosed above and within the Statement of Operations serve as indicators of the volume of derivative activity for the Fund. The number of call option contracts written and the premiums received by the Fund during the year ended September 30, 2016, were as follows: Contracts Premium Outstanding at Beginning of Year 1,484 $ 139,823 Options Written 24,535 2,484,050 Options Closed (3,656) (354,160) Options Exercised (10,551) (1,122,085) Options Expired (9,424) (880,647) Outstanding at End of Year 2,388 $ 266,981 19

21 NOTES TO FINANCIAL STATEMENTS (Continued) Offsetting of Financial Assets and Derivative Assets - The following table presents the Fund s liability derivatives available for offset under a master netting arrangement net of collateral pledged as of. Liabilities: Description Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statement of Assets & Liabilities Net Amounts of Liabilities Presented in the Statement of Assets & Liabilities Gross Amounts Not Offset in the Statement of Assets & Financial Instruments (1) Cash Collateral Pledged Net Amount Call Options Written $ 318,677 $ - $ 318,677 $ 261,977 $ 56,700 $ - Total $ 318,677 $ - $ 318,677 $ 261,977 $ 56,700 $ - (1) The amount is limited to the derivative liability balance and, accordingly, does not include excess collateral pledged. Impact of Derivatives on the Statement of Assets and Liabilities and Statement of Operations The following is a summary of the location of derivative investments on the Fund s Statement of Assets and Liabilities as of : Derivative Investment Type Risk Location on the Statement of Assets and Liabilities Amount Options Purchased Equity Investments in Securities at Value $ 34,800 Options Written Equity Options Written, at value 318,677 The following is a summary of the location of derivative investments on the Fund s Statement of Operations for the year ended : Derivative Investment Type Risk Location of Gain/Loss on Derivative Amount Options Purchased Equity Net realized gain (loss) on investments and options purchased $ (60,853) Options Written Equity Net realized gain (loss) from options written 1,032,161 Options Purchased Equity Net change in unrealized appreciation (depreciation) (69,800) on investments and options purchased Options Written Equity Net change in unrealized appreciation (depreciation) (78,769) on options written Security Transactions and Investment Income Investment security transactions are accounted for on a trade date basis. Cost is determined and gains and losses are based upon the specific identification method for both financial statement and federal income tax purposes. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Purchase discounts and premiums on securities are accreted and amortized over the life of the respective securities. Withholding taxes on foreign dividends have been provided for in accordance with the Fund s understanding of the applicable country s tax rules and rates. Expenses Expenses of the Trust that are directly identifiable to a specific fund are charged to that fund. Expenses, which are not readily identifiable to a specific fund, are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expense and the relative sizes of the funds in the Trust. Federal Income Taxes The Fund intends to continue to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute all of its taxable income, if any, to shareholders. Accordingly, no provision for Federal income taxes is required in the financial statements. The Fund recognizes the tax benefits of uncertain tax positions only where the position is more likely than not to be sustained assuming examination by tax authorities. Management has analyzed the Fund s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions related to the open tax years ( ) or expected to be taken in the Fund s 2016 tax return. The Fund identifies its major tax jurisdictions as U.S. Federal, Nebraska and foreign jurisdictions 20

22 NOTES TO FINANCIAL STATEMENTS (Continued) where the Fund makes significant investments. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. Dividends and Distributions to Shareholders Dividends from net investment income if any, are declared and paid quarterly, and distributions from net realized capital gains, if any, are declared and paid annually. Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income and distributions from net realized gains are determined in accordance with federal income tax regulations, which may differ from GAAP. These book/tax differences are considered either temporary (e.g. deferred losses) or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. Any such reclassifications will have no effect on net assets, results of operations, or net asset values per share of the Fund. Indemnification The Trust indemnifies its officers and Trustees for certain liabilities that may arise from the performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. The Fund s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the risk of loss due to these warranties and indemnities appears to be remote. 3. ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS Advisory Fees Stonebridge Capital Advisors, LLC serves as the Fund s investment adviser (the Adviser ). Pursuant to an investment advisory agreement with the Trust on behalf of the Fund, the Adviser, under the oversight of the Board, directs the daily operations of the Fund and supervises the performance of administrative and professional services provided by others. As compensation for this service and the related expenses borne by the Adviser, the Fund pays the Adviser a management fee, computed and accrued daily and paid monthly, at an annual rate of 1.25% of the average daily net assets. For the year ended, the Adviser earned management fees of $390,819. The Adviser has contractually agreed to waive all or part of its management fees and/or make payments to limit Fund expenses (exclusive of any front-end or contingent deferred loads; brokerage fees and commissions; acquired fund fees and expenses; borrowing costs (such as interest and dividend expense on securities sold short); taxes; and extraordinary expenses, such as litigation expenses (which may include indemnification of Fund officers and Trustees, contractual indemnification of Fund service providers (other than the Adviser)) at least until January 31, 2017, so that the total annual operating expenses of the Fund do not exceed 1.90% and 1.65% of the average daily net assets for its Class A and Class I shares, respectively. Contractual waivers and expense payments may be recouped by the Adviser from the Fund, to the extent that overall expenses fall below the lesser of the expense limitation then in place or in place at time of waiver, within three fiscal years of when the amounts were waived. During the year ended, the Adviser waived fees of $108,863. As of, the following amounts are subject to recapture by the Advisor by September 30 of the following years: Total $ 153,469 $ 119,761 $ 108,863 $ 382,093 Distributor The distributor of the Fund is Northern Lights Distributors, LLC (the Distributor ). The Trust, with respect to the Fund, has adopted the Trust s Master Distribution and Shareholder Servicing Plan for the Fund s Class A shares (the Plan ) pursuant to Rule 12b-1 under the 1940 Act, to pay for certain distribution activities and shareholder services. The Plan provides a monthly service and/or distribution fee that will be calculated by the Fund at an annual rate of 0.25% of the average daily net assets of Class A shares. For the year ended, pursuant to the Plan, the Fund paid $11,254. No such fees are payable with respect to Class I shares. The Distributor acts as the Fund s principal underwriter in a continuous public offering of the Fund s Class A shares. For the year ended, the Distributor received $114,292 in underwriting commissions for sales of Class A shares, of which $18,260 was retained by the principal underwriter or other affiliated broker-dealers. 21

23 NOTES TO FINANCIAL STATEMENTS (Continued) In addition, certain affiliates of the Distributor provide services to the Fund as follows: Gemini Fund Services, LLC ( GFS ) GFS, an affiliate of the Distributor, provides administration, fund accounting, and transfer agent services to the Trust. Pursuant to separate servicing agreements with GFS, the Fund pays GFS customary fees for providing administration, fund accounting and transfer agency services to the Fund. Certain officers of the Trust are also officers of GFS, and are not paid any fees directly by the Fund for serving in such capacities. Northern Lights Compliance Services, LLC ( NLCS ) - NLCS, an affiliate of GFS and the Distributor, provides a Chief Compliance Officer to the Trust, as well as related compliance services, pursuant to a consulting agreement between NLCS and the Trust. Under the terms of such agreement, NLCS receives customary fees from the Fund. Blu Giant, LLC ( Blu Giant ) Blu Giant, an affiliate of GFS and the Distributor, provides EDGAR conversion and filing services as well as print management services for the Fund on an ad-hoc basis. For the provision of these services, Blu Giant receives customary fees from the Fund. 4. INVESTMENT TRANSACTIONS The cost of purchases and proceeds from the sale of securities, other than short-term securities, for the year ended September 30, 2016, amounted to $62,241,509 and $58,013,041, respectively. 5. REDEMPTION FEES The Fund may assess a short-term redemption fee of 1.00% of the total redemption amount if a shareholder sells their shares after holding them for less than 90 days. The redemption fee is paid directly to the Fund from which the redemption is made. The Fund did not receive any redemption fees for the year ended. 6. DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL The tax character of distributions paid during the fiscal years ended and September 30, 2015 were as follows: As of, the components of accumulated earnings/ (deficit) on a tax basis were as follows: The difference between book basis and tax basis accumulated net realized gain and unrealized depreciation from investments is primarily attributable to the tax deferral of losses on wash sales and adjustments for real estate investment trusts. In addition, the amount listed under other book/tax differences is primarily attributable to the tax deferral of losses on straddles. 22

24 NOTES TO FINANCIAL STATEMENTS (Continued) Permanent book and tax differences, primarily attributable to the reclassification of Fund distributions and tax adjustments for real estate investment trusts, resulted in reclassification for the year ended as follows: Paid Undistributed Accumulated In Net Investment Net Realized Capital Income Gains $ - $ 1,728 $ (1,728) 7. NEW ACCOUNTING PRONOUNCEMENT In May 2015, the Financial Accounting Standards Board ( FASB ) issued Accounting Standards Update ( ASU ) , Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), modifying ASC 946 Financial Services Investment Companies. Under the modifications, investments in affiliated and private investment funds valued at Net Asset Value are no longer included in the fair value hierarchy disclosed in Footnote 2. ASU is effective for fiscal years beginning on or after December 15, 2015, and interim periods within those annual periods. Early application is permitted. Management is currently evaluating the implications of ASU and its impact on financial statement disclosures. 8. CONTROL OWNERSHIP The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumption of control of the fund, under Section 2(a)(9) of the 1940 Act. As of, Charles Schwab & Co, Inc., an account holding shares for the benefit of others in nominee name, held approximately 42% of the voting securities of the Fund s Class A shares. As of, Charles Schwab & Co, Inc. and Pershing LLC, accounts holding shares for the benefit of others in nominee name, held approximately 60% and 39%, respectively, of the voting securities of the Fund s Class I shares. The Fund has no knowledge as to whether any beneficial owner included in these nominee accounts holds more than 25% of the voting shares of either class. 9. SUBSEQUENT EVENTS Subsequent events after the balance sheet date have been evaluated through the date the financial statements were issued. Management has concluded that there is no impact requiring adjustment or disclosure in the financial statements. 23

25 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of Northern Lights Fund Trust III and the Shareholders of The Covered Bridge Fund We have audited the accompanying statement of assets and liabilities of The Covered Bridge Fund (the "Fund"), a series of shares of beneficial interest in the Northern Lights Fund Trust III, including the portfolio of investments, as of, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the two-year period then ended and for the period October 1, 2013 (commencement of operations) through September 30, These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Covered Bridge Fund as of, and the results of its operations for the year then ended, and the changes in its net assets for each of the years in the two-year period then ended and its financial highlights for each of the years in the twoyear period then ended and for the period October 1, 2013 through September 30, 2014, in conformity with accounting principles generally accepted in the United States of America. BBD, LLP Philadelphia, Pennsylvania November 23,